When most people hear the term "employee benefits," chances are the first benefit to leap to mind is health insurance. (Come to think of it, for anyone who is even halfway in tune with today's political scene, health insurance is probably the first thing to leap to mind when one gets out of bed each morning.)
While health insurance may indeed be the most prominent benefit, it's not the only issue facing the market and it's often only one part of a bigger plan. The range of employee benefit offerings these days goes well beyond the traditional. For those producers who succeed in this market, working with employers to provide solid employee benefits that help both the business and the employees can be one of the most challenging and gratifying markets there is.
To get a good idea of what faces today's employee benefits specialist, I posed a series of questions to a panel of savvy, successful producers: Julie Bartl; Jennifer A. Borislow, CLU, and her associate Mark S. Gaunya; and Randy L. Scritchfield, CFP, LUTCF.
1. Charles K. Hirsch: In light of the challenges that many employers face in today's economic climate, is this is a good time or a bad time to be in the employee benefits business, and why?
Julie Bartl: This is an excellent time to be in the employee benefits business. As professionals, we have more opportunity than ever to bring value to current and prospective client groups by educating them on strategic business solutions available through employee benefit offerings.
Jennifer Borislow and Mark Gaunya: This is a challenging time to be in the employee benefits business, and it is also a time filled with wonderful opportunities to grow and make a difference by helping others. Borislow Insurance (BI) is an employee benefits solution firm that partners with its clients to save them time and money, and our 27-year track record of helping employers of all sizes (from 10 to 7,000) effectively manage their employee benefits programs is a significant advantage for us in a highly competitive market. With the current economic challenges, employers of all shapes and sizes are struggling -- to maintain what they have, to grow new sources of revenue, and to effectively manage costs. Employee benefits are usually the No. 2 expense behind payroll, and in times like these, employers desperately seek solutions to trim costs while maintaining a competitive market position.
Randy Scritchfield: This is a good time. The reason is, as is often the case, good counsel from a trusted advisor is more valuable than ever. It is when "times are good" that our products often become commoditized and advice is sometimes devalued or overlooked. In today's market, good counsel is more important than ever. Being a Million Dollar Round Table (MDRT) member helps me stay current with my colleagues around the globe, and the association provides me with tools to help give the best counsel possible to my clients. This is the primary reason an MDRT member can distinguish himself or herself from other more conventional transaction-based brokers and agents.
2. Hirsch: In the broad array of benefit opportunities available to you to sell, where do you see the growth areas, and why?
Borislow and Gaunya: We are experiencing growth in many areas of our business and, to ensure our long-term sustainability, we consciously work hard to diversify our revenue sources. The largest percentage of our growth is derived from group insurance and, in particular, the innovative health insurance solutions we design and deliver to our clients. One notable area of expertise and a significant differentiator for our firm is with Consumer-Driven Health Plans (CDHP). CDHP is the combination of a lower-premium, higher-deductible health plan coupled with a health care account - Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), and Health Savings Accounts (HSAs). CDHP is designed around three core principles: transparency, responsibility and opportunity. And it is the careful blending of these three principles along with the unique mechanical features of the CDHP that "bends the health care trend" in a more sustainable way. Employers are looking for consultants and brokers who offer innovative strategies to address rising costs, and we believe CDHP helps our clients change their health care culture in a positive direction and lower costs in the short-term and long-term through employee engagement, education and empowerment. In addition to group insurance, we are also experiencing significant growth in voluntary benefits. As employers continue to cut back on their benefits budget, there is a huge need for employees to supplement or "fill in the gaps" their group insurance programs create with some additional personal insurance coverage. Voluntary benefits are delivered in the workplace and paid for by the employee through payroll deduction -- a win-win for the employer and the employee.
Scritchfield: The growth areas will be select key executive benefits. It remains a way to attract and retain key employees to help businesses grow. Additionally, business continuation will become more important and recognized as more of a priority than it has in the past.
Bartl: In terms of products, the growth areas are anything that provides increased value to the employees with low cost to the employer. Flexible Spending Accounts continue to be an emerging growth opportunity as well as the voluntary product offerings that protect income. Many households are back to one income due to economic downturns. For many families, that individual's income needs protection in the event of a disability because it's all they have at the moment.
3. Hirsch: What are your thoughts regarding the ongoing health insurance reform debate, and what is your best guess, as someone who sells in this market, as to where the country is headed on this issue?
Scritchfield: My guess is that there will be some legislation passed this year but not nearly the kind of dramatic change as was once envisioned. The private market (i.e., insurance companies and advisors) will remain (as it should) the core of our nation's insured health care system.
Bartl: Reform by definition is to improve by alteration, correction of error, removal of defects, or abolish abuse or malpractice in. The majority of Americans have health insurance that needs little if any reform. We need to improve the conditions for the Americans that have ineffective coverage or no health care coverage at all. The abuse and malpractice in health care is partly due to the consumer's lack of information and education. To say "health care" is complex is an understatement. As a country, we would be better served to understand how to become consumers of health care and how to better manage our individual health. Transparency and less complexity in health care would benefit all consumers. I think we have seen in recent months that health care reform debate is becoming a dividing line in our country. The divide is based largely on misunderstanding of this very complex system.
Borislow and Gaunya: We could talk for hours about our thoughts and perspectives on health care reform; it is a complicated challenge and one without a simple solution. With that said, it might be helpful for agents to take a close look at lessons learned from our three-year health care reform "experiment" in Massachusetts, the state in which we live and work (see sidebar on page 50).
4. Hirsch: What is the most effective employee benefits sales idea that you've used recently?
Bartl: I use a consultative approach when prospecting new clients. Our firm performs an "audit" of a prospect's current benefit programs in comparison to his or her objectives. We are successful in implementing new products and services because we align the plans with the client's goals.
Borislow and Gaunya: Our most effective employee benefits sales idea is the marketing of our newest book, Bend the Healthcare Trend -- How Consumer-Driven Health and Wellness Plans Lower Insurance Costs. It is a practical and insightful resource guide for employers of all sizes and from all industries to understand and solve the challenges associated with the rising cost of health insurance. Writing a book of this magnitude has been a significant undertaking, and also a labor of love. We hope it will be viewed as a service to the market and that it will enhance our credibility in the employee benefits arena, helping us to be recognized as experts in the CHDP/wellness space. The book has created new opportunities for us to meet with CFOs, human resource professionals and business owners. We use the book with existing clients, centers of influence who can refer business to us, and with prospects. By sending out the book to prospects in advance of a meeting, we put ourselves in a great position when we meet with them. It sets the stage for a meaningful dialogue about an innovative solution to rising health care costs we know works, and helps us immediately establish our credibility, as well as our breadth and depth of experience.
Scritchfield: I tell small business owners that they have two sets of "dependents" -- their personal family and their "business" family. Through the use of key person protection, insured buy-sell agreements, and disability overhead/buyout protection, they can protect the continuation of their business and "families." Then, to the extent it's practical, they also can use business resources to provide for their personal protection, through executive bonus and similar plans.
5. Hirsch: One often hears discussion about the importance of the producer becoming part of the employer's "team." There seems little doubt that this is an effective strategy, but in practical terms, what must the producer actually do in order to accomplish that?
Borislow and Gaunya: One of the cornerstones of our success is identifying and qualifying the "right" clients. What does "right" mean? It means working with employers who view you as a partner rather than a broker of insurance products and services. When we find the "right" client, that client will embrace our firm as an extension of his or her human resource and finance team that can add significant value to the client's organization. More specifically, this right client leans on us for strategic planning consultation and day-to-day service and support, and because we have taken the time to understand his or her goals, objectives, and unique challenges, we are able to help the client achieve individual and organizational success. Through planned and unplanned communication and frequent interaction using various methods (telephone calls, e-mail, face-to-face meetings, written correspondence), this kind of relationship with clients can and should be established to ensure a long and mutually rewarding partnership.
Scritchfield: The producer must always be in the "advisor" role, clearly working from the same side of the table as the employer. The producer should be a resource for all the employer's needs, through a referral network. I tell my business prospects to "put me on your payroll" to work for you, but you won't have to pay me FICA or other employee costs.
Bartl: Producers should embed themselves into different areas of an organization. We should not limit our contact and value to the employee benefits department but also finance, operations, and health and safety. Employee benefits should be a holistic strategic view of an organization's future. More important than being a team member or advisor, producers need to think like owners of an organization. Knowing how employee benefit programs impact an organization's top and bottom line will aid the producer in accomplishing results on behalf of the group.
6. Hirsch: If you were advising a young producer who was considering a move into the employee benefits area, what would you tell him or her about the steps he or she would need to take? And as you look at your own transition into this market, knowing what you know now, what would you have done differently?
Scritchfield: I would encourage a young producer to start with small employers. They tend to be more relationship-oriented and better suited for an MDRT member. However, the producer could work with any size group if he or she are not afraid to do what always makes sense: Work jointly with another agent or broker who brings to the table what they may not have. Joint work, be it through mentoring or a peer relationship, is one of the best ways in which I have built my practice. The mentoring and networking opportunities available through membership in a distinguished organization such as MDRT are invaluable and could be very beneficial to a young producer, as they have been to me.
Bartl: I would advise a new/young producer that the sales cycle in employee benefits is long. In order to cultivate trust and long-term clients, you need to be patient. It is na?ve to think that relationships alone will lead to business sales. Continue to learn about the industry and technologies that improve the administrative processes, then transfer that knowledge to your clients and prospects on a continuous basis.
Borislow and Gaunya: As a young producer, experience is the missing element of long-term success. So, how does a young producer gain experience? The first step is to find a producer with a well-established employee benefits practice and spend a lot of time getting to know him or her, what makes him or her successful, and why he or she is unique in a crowded field of employee benefits brokerage and consulting. Then, find a current client or a strategic relationship you can refer to that producer so you can work together -- see one, do one, teach one -- a best practice approach we highly recommend for long-term success. Our career paths were very different. Jennifer started her career at John Hancock selling individual life and disability insurance, and Mark followed the corporate path working for large insurance companies like Blue Cross and Blue Shield, CIGNA Healthcare, and Tufts Health Plan. Five years ago, we joined forces and created a highly successful formula of 1+1=3. So, would we have done anything differently? The short answer is no. Our career paths helped us gain valuable experience, skills and knowledge that we leverage today to run our thriving employee benefits practice. We both believe there is no greater teacher than experience; it teaches you what works and probably more importantly, what doesn't work.
What we can learn from the Massachusetts Health Care Reform "Experiment"
By Jennifer A. Borislow, CLU, and Mark S. Gaunya
We support health care reform. Three years ago, Massachusetts implemented health care reform with the goal of universal access and lower cost. That practical health care reform experience uniquely equips us with best practices and, more importantly, lessons learned for the nation.
By all accounts, the Massachusetts Healthcare Reform Law has been a huge success in terms of insuring the uninsured. Massachusetts now boasts the highest rate of insured population in the country with more than 97% of our residents covered by health insurance.
With that said, the Massachusetts law has done little to control costs, and it also has created a significant challenge in the form of longer wait times to see a physician. In fact, although Massachusetts has the highest number of physicians per capita in the country, we also boast the longest wait times -- an average of 46.7 days.
So, what's the right formula for success? We believe there are "ingredients" in the Massachusetts Healthcare Reform Law that should be applied on a national basis. For instance, we believe an individual mandate and the elimination of pre-existing condition limitations with guarantee issue underwriting is a best practice. We also believe providing financial subsidies to those citizens who are economically challenged (i.e., earn below 300% of the federal poverty level) so they can afford to purchase health insurance is another best practice.
On the other hand, we are not in favor of a government-run, public plan option. Massachusetts achieved near universal health care without a government-run, public option and instead partnered with the private health insurance industry. In our view, the notion that government will create competition is flawed. Quite the contrary, we believe the government would threaten the long-term viability of the private health insurance market. How can you be a referee and a player at the same time and call the outcome objective when you don't play by the same rules?
We are not in favor of an employer mandate. We believe it is socially responsible for an employer to offer health insurance, but we think the private market will determine the outcome of an employer who does not offer health insurance to its employees.
As for cost, once again there are no simple solutions. There are many in government circles who believe the discounted fee for service reimbursement methodology that is used today encourages providers to order more health care services than necessary, essentially suggesting that providers place their own financial interests ahead of the health of their patients.
Unfortunately, politicians in Massachusetts are leveraging this thought process and contemplating a legislative solution called payment reform to "solve" the cost problem. What is payment reform? While the details are not yet known, early indications are pointing toward bringing back a provider reimbursement methodology called global capitation. Essentially, this form of provider reimbursement pays providers a set amount of money each year to care for their patients, and the total amount per patient is reportedly adjusted to properly reflect the "health risk" that each patient brings to their physician's practice. Providers accept the "global fee" and then work hard all year long to manage those funds and the care of their patients with the goal of not spending all of that money so they can operate their practices profitably.
Why won't this work? Global capitation isn't a new strategy. In fact, it was originally introduced in the early 1990s and failed for two big reasons: (1) providers don't manage financial risk well and are not educated nor set up to manage it, and (2) in many cases, patients don't get the care they need because the financial resources to deliver that care are gone (i.e., rationing of care). Fundamentally, we don't believe this cost control strategy works because it completely ignores the "demand" element of health care - namely, the consumer (patient).
What do we suggest? Again, there are no easy answers, but we do think there are some core principles that should be considered. For starters, any sound economic model addresses both supply and demand. The cost control strategy discussed above doesn't address demand for health care services or some of the other "levers" we believe are driving up health care costs.
From a demand perspective, we strongly believe the consumer of health care (patient) needs to be engaged, educated and empowered in the three principles of CDHP and wellness we addressed in the roundtable discussion. The cost and quality measures of health care services should be transparent. Consumers should have responsibility to live their lives in a responsible manner, and when they access the health care system (except in the case of a true emergency), make educated and informed decisions that balance benefit and cost. Finally, if consumers behave more responsibly and make more informed choices, they will have an opportunity to benefit physically and financially.
There are other cost drivers that should be contemplated in the cost containment discussion and here are our top five:
Tort Reform -- The defensive practice of medicine adds billions of dollars (by some accounts, over $200 billion) to our total health care spend. To reduce the potential for liability, providers order tests and conduct unnecessary services.
State Mandates -- When a fully insured product is purchased, it includes a list of required services that must be covered by the health plan, and in many cases this adds unnecessary cost to the total premium for those health plans. For example, in Massachusetts we have 43 state-mandated benefits including infertility coverage. By some estimates, this coverage adds an additional 7% to the cost of health plans in Massachusetts. While infertility treatment is a valuable service for those who need it, mandating the benefit adds cost and positions Massachusetts in an unfavorable position from a risk management point of view.
Minimum Creditable Coverage (MCC) -- With the advent of the Massachusetts Healthcare Reform Law, the state established a minimum level of benefits that must be included in a health plan in order for it to be compliant with the law. While this thought process is well-intentioned, it is inherently flawed in its design. What Massachusetts now considers a minimum standard of coverage would be labeled as overly generous in most other states across the country.
Interstate Competition -- Currently, there are approximately 1,300 health insurance companies in this country, which should foster higher levels of competition and drive down cost. Unfortunately, most of those insurers are restricted to market and sell their products in one or at the most, a handful of states.
Provider Reimbursement -- There are two areas of challenge and concern here. First, the federal government (Medicare and Medicaid) shifts a tremendous amount of cost to the private health insurance market (and employers) because it doesn't reimburse providers adequately. By most accounts, the federal government reimburses providers $.75 for $1 of health care. In turn, private health insurers reimburse providers $1.25 to make up for the federal reimbursement shortfall. The second challenge is that most providers contract with health insurance companies on a discounted fee-for-service basis. In most cases, those provider contracts include provisions to increase the level of reimbursement from year to year to account for inflation. The inflation factor used in health care contracting, however, accelerates at two to three times faster than the general rate of inflation (better known to all of us as health care trend).
In the end, we are not quite clear on the direction of the federal health care reform debate, although it appears health care reform town hall meetings all across the country this summer reinforced our positions on this issue.
One thing is clear -- this debate is far from over and will continue to evolve. And we will continue to participate in the discussion with the most important goal in mind: To keep health care private and out of the hands of the federal government.
JULIE BARTL is vice president, employee benefits insurance, for Johnson, Kendall and Johnson Benefits, Inc., in Newtown, Pa. She joined the firm in 2003 following 10 years of underwriting and marketing. Julie holds a bachelor's degree in corporate communication from Temple University and received her master's degree in organizational communication from LaSalle University. Julie works with mid-size to large employer groups, in segments of technology, health care, business services and manufacturing.
JENNIFER A. BORISLOW, CLU, is founder and president of Borislow Insurance in Methuen, Mass. For more than 26 years, she has provided business owners, executives and professionals with business plans for their benefits offerings. She is a 25-year member of MDRT, a 10-year Top of the Table qualifier, and the 2nd Vice President on the MDRT Executive Committee. She will become President in 2012. She is past chairman of the MDRT Top of the Table and has spoken at numerous industry meetings.
MARK S. GAUNYA is a principal at Borislow Insurance in Methuen, Mass. He is a five-year member of MDRT and a Top of the Table Advisory Board member. He is also a state chapter leader for NAHU, currently serving as the President of the Massachusetts Association of Health Underwriters (MassAHU). He has been a featured speaker at MDRT, Top of the Table, and NAIFA meetings, as well as various other industry associations across the country.
RANDY L. SCRITCHFIELD, CFP, LUTCF, is a 25-year MDRT member with three Court of the Table and eight Top of the Table honors. He is the Chair of the 2009 MDRT Premium Qualifications Task Force and was a four-time MDRT Management Council Divisional Vice President, most recently as the 2007 Annual Meeting Divisional Vice President. He has spoken extensively at industry events including two MDRT Annual Meetings. He is president of Montgomery Financial Group in Damascus, Md.
